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“parent Plus Loans: Supporting Your Child’s Education With Federal Aid”
Very few families can say that they have managed to save all the money their child needs to complete a college degree. In fact, most students achieve their educational goals by combining several financing options. This includes savings, parental contributions, part-time work while in school, and various types of financial aid.
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When scholarships and grants are not enough to cover tuition, students and parents can borrow additional funds from the federal government, private, and nonprofit lenders. This can be a confusing process, so here’s a quick tutorial to explain the options available to students and parents. The first step should be to complete the Free Application for Federal Student Aid (FAFSA).
You might think that financial aid only means scholarships or grants for students with financial need, but most students will receive some form of financial aid when they complete the FAFSA. It helps students qualify for grants, scholarships, work-study programs, and federal direct student loans.
Some loans are offered by the US. Department of Education to help students achieve their higher education goals. Here’s a look at the federal direct student loans available through the FAFSA:
If you do the math, first-year students can receive up to $5,500 in federal direct subsidies and unsubsidized loans. Combined with savings, scholarships, and other state financial aid, this is a great start to paying for college. In fact, financial experts often recommend that students take advantage of all subsidized and unsubsidized federal loans offered through the FAFSA because these types of student loans generally have lower interest rates than PLUS or private loans.
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However, these loans charge fees and have loan limits. So, if grants, scholarships, and subsidized loans aren’t enough to cover tuition, students and parents have other loan options – PLUS Loans and personal loans.
Parent PLUS and Grad PLUS federal loans are available to parents of undergraduate students and graduate or professional students. Interest will be compounded as the student progresses through school.
However, just because PLUS Loans come from the federal government does not mean they have the same interest rate as federally subsidized and unsubsidized loans. So, it’s in the best interest of both students and parents to shop around and compare student loan rates. In many cases, private student loans may offer more competitive rates and fees than PLUS Loans.
Another point to note – many colleges will add a link to their student financial aid award letter or offer to make it easier for you to apply for a PLUS Loan. This doesn’t mean you should take advantage of this option, but it’s a good way to start doing homework if you need extra funds to pay for school. Keep in mind that in many cases, personal or alternative loans may have better interest rates and lower (or zero) fees to save students money.
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The private or alternative student loan market has grown significantly in recent years. These loans are issued by other lenders, such as banks, credit unions, online lenders, and non-profit organizations, such as the College Foundation, Inc. (CFI).
Interest rates and terms can vary from lender to lender, so you should do your research and find the loan that best suits your needs. You will want to consider how much the lender will charge in terms of loan fees, whether they offer fixed or variable interest rates, and can you afford the loan? For example, NC Assist Loans charge no fees and have lower interest rates than federal PLUS Loans.
NC Assist Loan is offered by CFI, a North Carolina nonprofit organization that administers loans on behalf of the State Educational Assistance Authority. This means that there is no shareholder or demand for increased profits. NC Aid Loans are focused on helping students in North Carolina.
Taking advantage of financial aid and doing your homework on the benefits of PLUS and personal loans can save you thousands of dollars in fees and interest over the life of your loan. We have additional resources to help you shop for student loans. And when you’re ready, it’s also simple to start the application process on our website.
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College Foundation, Inc. is proud to offer NC Assistance Loans to students and parents to help fill the tuition gap. You are probably looking for the easiest way, including getting all your debts forgiven. But is Parent PLUS Loan forgiveness real? And what are your options for getting rid of this thing for good? Time to find out!
So, you want to get rid of the Parent PLUS Loan. Maybe your child is not receiving enough financial aid for college or you are a student looking for ways to relieve your parents of this financial burden. Either way, we know you’d rather not have a loan for your relationship and do something awkward at family dinner.
But can Parent PLUS Loans be forgiven? Short answer: Technically, yes—there are several ways to get Parent PLUS Loans forgiven, some with more requirements than others. But let’s take a look at the details of both options so you can make the best decision for your situation.
Back in August 2022, President Joe Biden announced a student loan forgiveness facility canceling federal student loan debt up to $10,000 for borrowers who earn less than $125,000, and up to $20,000 for borrowers who also received a Pell Grant in college.
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But in June 2023, the Supreme Court blocked Biden’s pardon. So, if you bank on this plan to free you from the PLUS Parent Loan. . . know it doesn’t happen.
And while you may be very disappointed with this result, it is not a good idea to trust the government to eliminate student loan debt. You’re better off tackling your debt alone—because you can!
Although Biden’s forgiveness plan is off the table, there are several federal forgiveness programs available that technically cover Parent PLUS Loans. But you have to jump through a lot of hoops before you can apply—and even then, the approval rate is pretty terrible.
There is a group of repayment options for student loan borrowers known as Income Driven Repayment (IDR) Plans. Under these plans, the only type that Parent PLUS Loan borrowers can use is the Income Contingent Repayment Plan (ICR). The goal with this plan is to make smaller monthly payments with the expectation that the student loan will be forgiven after 25 years.
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But here’s the hard part about applying for ICR: Parents with PLUS Parent Loans are not eligible for Income-qualified repayment plans. The only way to qualify is to consolidate Parent PLUS Loans into a Direct Consolidation Loan—you can do this with either a Parent PLUS Loan or with other student loans you have as
. (Remember how parents and their children are considered separate borrowers? That means you as a parent can’t consolidate your loan with any loan in your child’s name.)
And the income contingent part of the program is pretty strict. Not only do you have to verify that your income is low enough to qualify, but you also have to re-verify every year to keep your lower payments. Otherwise, you’ll end up with IDR money and go to the standard 10-year repayment plan (which means you’ll have no balance to forgive at the end). Plus, if your income grows enough, you can pay more than the standard repayment plan.
And in April 2022, the National Consumer Law Center reported that although cancellation of student loans below the IDR has been a thing since 2016, only
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But apart from that, the IDR repayment plan is forever – twenty five years for ICR. Do the math and ask yourself how old you will be on the other side of that bargain. Do you really want to carry student loan debt into retirement?
Arrange to have your loan forgiven through ICR, you should be aware that you will have to pay income tax on the amount forgiven. The IRS is asking for a pretty big apology, some even calling it a tax bomb because of the way it blows up your bank account. Yes!
You can get a forgiven Parent PLUS Loan, but you must have an Income Repayment Plan (IDR) to qualify – it’s a package deal.
Actually, the borrower (parents) already
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